LESSON 8 PRODUCTIVITY
Productivity
Ratio of the amount of goods and services
produced (output) per unit of productive
resources used (input).
As a ratio, productivity can be increased by:
• producing more goods and services with
the same amount of resources
or
• by producing the same amount of goods
and services with fewer resources.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
Productivity
Personal and national standards of living are
directly related to labor productivity.
• The greater an individual’s labor
productivity, the higher wage that
individual can command.
• People must produce more per person if
they are to receive more per person.
Individual workers can increase productivity
by investing in education and training
(human capital).
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
Participate in a simulation that will demonstrate:
• How productivity is calculated
• The factors that can increase productivity
Work in teams of four to produce pizzas (made
of paper).
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
• How to make a pizza:
– Trace the template (a small paper plate) on
a piece of 8.5″ x 11″ paper.
– Cut out the circle.
– Draw 10 pepperoni pieces, about 1″ in
diameter, on the pizza, using the red
marker.
– Draw 15 black olive slices, ½″ to ¾″ in
diameter, on the pizza, using the black
marker.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
• Each round will be three minutes long.
• At the end of each round, quality control
experts will determine if pizzas meet
standards.
• Complete the data chart (Activity 8.1).
• Round 1:
– Each employee will work alone.
– Employees must complete one pizza
before moving on to the next.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
Thoughts on how to improve productivity?
Round 2:
• Assign each employee a different task.
• You may work on more than one pizza at a
time.
• You are limited to the same resources as in
Round 1.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
Thoughts on how to improve productivity?
Round 3:
• Each team may acquire a capital good: a
machine that pre-cuts pizza dough (paper
plates).
• Machine rental is $2.50 per round.
• Reorganize the factory.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
How was productivity calculated?
Labor productivity = output per worker over a set time
• What happened to productivity between Round 1
and Round 2, and between Round 2 and Round
3? Why did this occur?
• What happened to quality between Round 2 and
Round 3?
• What effect did investing in capital goods (the
pizza-cutting machine) have on productivity?
• What effect did increased productivity have on
average costs (row 10, Activity 8.1)? Why is this
important?
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
• What effect will increased productivity in the pizza
factory have on wages?
• What happens if labor productivity increases in the
overall economy?
• What costs were incurred by attempts to increase
productivity?
• What are the advantages and disadvantages of
specialization and division of labor?
• What else could the pizza factory do to increase
productivity?
• What should a company consider before investing
in capital, such as the pizza-cutting machine?
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
Factors That Increased Productivity
• Specialization/division of labor
– Assigning small, repeatable tasks at which
workers gain expertise, as in Round 2
– Results in more output per unit of labor
• Increase in human capital
– Acquired through education/training, displayed
in all three rounds
• Investment in capital goods
– Tools/machines/factories as in Round 3
• Technology
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 8 PRODUCTIVITY
U.S. Labor Productivity
http://research.stlouisfed.org/fred2/series/OPHNFB
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY